This week, Itaú Chief Executive Officer Roberto Egydio
Setubal told shareholders that Banamex could provide a potential
entrance into Mexico's banking industry. Setubal said so far
there has been no contact with Banamex or controlling
shareholder Citigroup Inc.

Banamex, which has 16 percent of the banking assets and 15
percent of the loans in Mexico, could give Itaú a significant
presence in the country, Deutsche Bank analyst Tito Labarta said
in a client note.

Banamex's recurring return on equity at the end of September
was 9 percent, compared with an average 13 percent to 14 percent
for rivals Grupo Financiero Banorte SAB de CV and
Santander Mexico Financial Group SAB de CV.

Based on price-to-earnings and book valuation methodologies,
Labarta estimates Banamex's value at between $14.2 billion and
$22.1 billion. However, since Itau is trading at a lower
multiple, "a transaction at these levels could be dilutive" for
shareholders of the Brazilian lender, he noted.

While Mexico's growth potential is better than Brazil's,
"Banamex's weak profitability could be a concern in the case of
a potential deal, which would likely influence the price that
Itau would be willing to pay and that Citigroup would accept, if
it is even willing to sell," Labarta wrote.
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